Pemex, Mexico’s state owned oil…
Qatar’s economic growth has slowed…
Saudi Arabia will export full volumes of crude oil to at least three Asian clients next month, sources from the company told Reuters. The move suggests that the Kingdom is determined to maintain its market share in the fastest-growing market for energy in the world, especially when the news is seen against the backdrop of an earlier report that Aramco is lowering the prices for May exports to Asia.
Aramco’s export prices under long-term contracts – its preferred way of operating abroad – are based on the monthly average of oil prices in Dubai and Oman, adjusting for each grade. For May, it has raised the discount for the Arab Light benchmark to $0.45 a barrel, from $0.15 a barrel for this month’s shipments. The size of the discount is substantial enough to reinforce the belief that Saudi Arabia will do whatever it takes to keep the Asian market, and possibly even expand its share of it, seeing as everyone wants to export crude to Asia.
Meanwhile, the Kingdom has made an announcement that will keep oil prices higher for longer: Riyadh will back a production cut extension into the second half of the year. The move, which has already won the support of some OPEC members such as Kuwait and Angola, became necessary as prices failed to live up to OPEC’s expectations, falling back to $50 a barrel and below after briefly hovering around $56 (Brent) and $54 (WTI).
Related: Former Russian Energy Minister: U.S. Should Join OPEC Output Cuts
Now, geopolitical tensions in Syria have pushed Brent back to $56 a barrel and WTI to $53, but from OPEC’s perspective, geopolitical tensions are probably insufficient to ensure sustained price improvement.
With Saudi Arabia’s support, the extension is more likely than not to be effected. The question remains, however, whether it will push prices up to the coveted $60 a barrel, with U.S. shale producers unlikely to start cutting their output with prices rising.
By Irina Slav for Oilprice.com
More Top Reads From Oilprice.com:
Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.